Screening Room: Cinema Savior– or Digital Death Star?

By Bob Snyder
rAVe Europe

ScreeningRoom-0616Napster, Facebook, Plaxo, Spotify… what they all have in common is founder or investor Sean Parker.

Sean Parker is the archangel Gabriel of digital disruption, a billionaire entrepreneur whose very presence heralds the apocalypse of traditional business. He is as welcome in any industry as Carl Icahn is on any company board.

Now Parker descends on Hollywood offering a deal that would, instead of 30 pieces of silver, sell out theater owners for a $150 set-top box and $50 per movie.

Attendance at movies bounce-backed last year to 1.34 billion but Hollywood feels the pressure from streaming alternatives. And internet behemoths — not content to be digital streaming platforms– are starting to figure out they can be content creators.

Cut out movie theaters, cut out Hollywood’s extravagant film companies… it’s a perfect prayer book for digital disruption.

Screening Room claims its secure, anti-piracy technology lets users watch movies using a $150 set-top box: the start-up would charge $50 to rent a movie and users would have 48 hours before it expires.

Sean_Parker-0616Film companies are split… According to Variety, Sony, Universal, and Fox are all interested while Disney is not. Their thinking is theater turnout is great if you have a blockbuster, but most films are not. Extra revenue is appealing. And, hey, in the land of Rocky #7, X-Men #7 and 29 Godzillas, who wants to depend upon upping their creativity?

Directors, the rock stars of Hollywood, are split. Peter Jackson, the Academy Award-winning director behind The Lord of the Rings and The Hobbit series, is publicly backing Parker’s Screening Room, along with JJ Abrams, Steven Spielberg and Martin Scorsese.

Others like Avatar director James Cameron and Interstellar director Christopher Nolan argue against. Cameron’s producing partner Jon Landau says, “…the in-theater experience is the wellspring that drives our entire business, regardless of what other platforms we eventually play on and should eventually play on. No one is against playing in the home, but there is a sequencing of events that leads to it.”

Most theater owners think the film companies want to hand the keys to the kingdom to the barbarian at the gate. Only Chinese-owned AMC, one of America’s largest theater chains is reportedly on board.

So in comes Sean Parker with a devil’s bargain to open the door: he will give customers two tickets to see in theaters every movie they stream through the Screening Room — and he will also give movie theaters as much as $20 of the $50 rental fee.

In fact, Parker is telling Hollywood he will only keep 10 percent. What he probably isn’t explaining is how he could end up owning the movie platform, able to extract a fortune from an audience portal and cut new deals at-will.

Peter Jackson is so convinced Screening Room could create an additional $8.5 billion in annual revenue for studios (if the expected 20 million households join Screening Room renting an average of 12 movies per year that he is the first major filmmaker to go public with a detailed rationale

He thinks if Screening Room engages 25- to 39-year-old customers who’ve “almost completely bypassed cinemas” — this will allow studios to invest more money in film budgets and making more movies overall.

On an interview with DEADLINE, Jackson argues Screening Room is designed to sell movie tickets to people that want to buy them but can’t. “Who are those people? The frequent moviegoers — the ones that go to three films or more and generate over 50 percent of box office — are only 11 percent of the movie-going audience. So 89% of everyone that goes in the theater only sees one or two films a year and those are the ones you need buying more tickets.”

“Here’s the key to Screening Room: In 2014, people aged up to 24 went to the cinema 15 million times. People 40 and over, 15 million. Then look at the key age group — 25-39 — there was only 6.7 million people. That’s because a lot of those people are bringing up young families, concentrating on their careers. Most of them were frequent moviegoers when they were younger, but not now, because they cannot get out.

The director went on to tell DEADLINE, “Screening Room did surveys, and the non-target audience was asked if they’d pay $50 to see a film at home. 83 percent of that non-target audience said no. That’s what we want, for those people to continue seeing movies in cinemas. We asked the same question to our target audience; the people stuck at home, the 25-39 year olds. And 70 percent said yes they would spend $50. This is what persuaded me.”

If this sounds to you like when book publishers defended their decision to help start Amazon, then you share our own deja vu.

The implications for residential integrators are not yet clear. The promise of a new and secure STB suggests Screening Room recognizes they can’t partner with internet companies and telcos who are selling their own cable and movie channels. Will they attempt to use residential installers? Will installers also get a piece of the monthly film rental?

While this should have modest impact on the residential kit being sold today, it does beg the question of how cinemas will react to keep attracting customer.